The financial structure of big-budget varsity sports is broken
Dr J. Patrick Raines
- Dr. J. Patrick Raines is Dean and Emeritus Professor of Economics at Belmont University in Nashville.
In the early 1970s, I was a student-athlete studying economics at the University of Alabama and played center for the 1972 team that played in the Orange Bowl for the National Championship. . The college game payout was $ 10 million, while players only received a monthly “laundry check” for $ 15.
When I suggested that the players get a share of the college manna, the arguments against the idea were the same as they are today: the sports department couldn’t increase our allowance by $ 15 because the other non-profit sports would not survive, or we would lose our competitive advantage if we did not reinvest the funds into the program.
But it’s not about paying scholarships to football players – or any other athlete. Rather, it is a rational plea for society to reflect on the outrageous opportunity cost of $ 100 million contracts for head coaches and millions of payments to failing or departing coaches. USC is expected to pay Lincoln Riley $ 110 million and LSU has contracted Brian Kelley for at least $ 100 million over 10 years.
First, although universities and the NCAA receive $ 18.9 billion in annual revenue, large-scale college football is shockingly unprofitable. Even though the best conferences in the country lose money, coaches are the highest paid public employees in 44 states. Over the past decade, universities attending FBS conferences have paid more than half a billion dollars ($ 533 million) to licensed football head and assistant coaches, and men’s and women’s basketball coaches. The SEC led the way, contributing $ 151 million of the total. In 2021, $ 100 million in buybacks are owed to 10 failing football coaches.
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There is a role for a discussion of the economics of athletics in our higher education institutions in America, in which the economic impact of sporting events on the businesses and communities of college towns is considered. But another consideration in states where these skyrocketing wages are paid is the level of poverty, educational attainment, and poor public health. The $ 533 million in installments would have been a significant down payment on America’s $ 1.7 trillion in student debt.
In Louisiana, 19% of the population (875,000 people) do not earn enough income to eat, house and travel, that is to say the poverty line of $ 25,000 determined by the federal government. Although the percentage is lower in California at 12%, 4.6 million people fall below the poverty line. In Louisiana and California, there are 391,000 and 3.5 million citizens under the age of 65, respectively, without health insurance. This means that a salary of $ 100 million for a football coach could potentially lift 4,000 families out of poverty and reduce the burden on taxpayers as state incomes rise thanks to healthier citizens and university graduates. , better educated and more productive with more discretionary income to spend.
As U.S. Senator Chris Murphy of Connecticut recently noted, it’s a shame that colleges and the NCAA illegally collude to restrict athlete compensation while coaches, agents and industry executives receive payments. professional level. For Amy Perko, CEO of the Knight Commission on Intercollegiate Athletics, it’s an example of the broken financial structure of big-budget college sports. A more careful analysis of the social costs and benefits of college athletics could lead to better self-regulation of the college athletic industry. Otherwise, legislation could come from Washington to limit coaching contracts and allow athletes to engage in collective bargaining.
Dr. J. Patrick Raines is Dean and Emeritus Professor of Economics at Belmont University in Nashville.